Two competing health-food grocers are searching for locations in the Sacramento region as part of a larger expansion into Northern California.

Sprouts Farmers Market and Henry’s Farmers Market each anticipate opening three or four stores locally next year, representatives said this week.

The grocers, whose similarities include a connected history, will enter a crowded field of food sellers in the four-county region — and one that is expected soon to have even more players, including Fresh & Easy Neighborhood Market and locally owned Good Eats. Grocers operate on tiny profit margins, so new operators could make an already competitive market even tougher.

Sprouts, a Phoenix-based chain with 38 stores, wants to open three or four stores in the region next year and another three or four over the next couple of years, said Michael Shaffer, Sprouts real estate director.

Sprouts expects within a month to have leases signed for three locations, in and around Folsom, Roseville-Rocklin and Citrus Heights, with possibly others to follow in 2011 in Elk Grove and Natomas, said Greg Thomas, a broker with Cornish & Carey Commercial, who is looking for local sites for Sprouts.

Henry’s, a division of Smart & Final Inc. with 32 locations, isn’t disclosing precisely where it wants to locate.

“We haven’t signed anything yet,” said Janet Little, a nutritionist and spokeswoman for Henry’s.

Each grocer is leery of its competitor knowing where it might land, considering they’re both looking at empty spaces formerly occupied by Mervyn’s, Linens ‘N Things and Circuit City.

Too much competition?

Sprouts and Henry’s are making their moves now to take advantage of cheaper retail space — tenants and prospective tenants hold all the cards, given the large number of retail vacancies — and of consumers’ desire to eat healthier at affordable prices.

“People are trying to eat healthy, but they’re on a budget and trying to save money,” Little said.

But some say the local market already has too many players.

“Good luck. This town is so over grocery store-d,” said Boyd Cahill, a retail real estate broker with TRI Commercial/Corfac International.

Rick Martinez, a CB Richard Ellis broker, is more optimistic that the two grocers have a good concept and a compelling niche.

Sprouts signed its first Northern California lease — a store site in Sunnyvale — last month, Shaffer said. Sprouts will open a few stores next year in the Bay Area and “quite a few” in 2011, he added, without quantifying the number. Sprouts is working in the Bay Area with Cornish & Carey brokers Jim Randolph and Sean O’Carroll.

A shared past

The similarities between the two grocers aren’t by chance. The family of Henry’s founder, Henry Boney, established Sprouts. Boney’s son and grandson are Sprouts’ chairman and chief executive officer, respectively.

Both grocery chains operate stores that are smaller than a conventional supermarket but larger than a Trader Joe’s or the planned Fresh & Easy markets. Sprouts likes 25,000 to 30,000 square feet, while Henry’s prefers 25,000 square feet.

A conventional supermarket can occupy as much as 60,000 square feet, while Fresh & Easy prefers 10,000 square feet.

Sprouts will take existing spaces or build its own stores. Henry’s opens primarily in existing retail buildings.

Sprouts isn’t afraid to locate next door to a Safeway or a Trader Joe’s, Shaffer said.

Customers of Sprouts and Henry’s don’t patronize just those chains for their groceries. Trader Joe’s customers can’t get everything they need from that specialty grocer and supplement their shopping with trips to a Raley’s, Nugget or Costco. Likewise, Sprouts and Henry’s focus on produce, bulk foods, all-natural beef, vitamins and the like, leaving customers to buy other household goods elsewhere.

As a result, no one grocery company would suffer from the arrival of Sprouts or Henry’s. Some grocers, however, might feel it more than others. Whole Foods Market, known for its wide selection of healthy fare but also for being hard on the budget, is one.

Nugget Market Inc. and Raley’s Inc., two locally based chains that promote their fresh produce and meat, are other possibilities, said Bob Reynolds, a Moraga grocery consultant not connected with Sprouts or Henry’s. The least vulnerable would be discounters and warehouse stores, including Wal-Mart and WinCo, he said.

“Real estate values are coming down. There’s a fair amount of vacancies,” said Steve Edwards, a retail real estate broker with Potter-Taylor & Co., whose big-box client list includes grocery-selling Wal-Mart. But just because real estate is more affordable, he added, that “doesn’t necessarily substantiate a successful business model.”

Sprouts is funding its expansion with income from operations and with about $25 million it raised from debt this year, said Doug Sanders, Sprouts chief operating officer. The retailer has gradually picked up its expansion pace over the past few years. This year, the company will add 11 stores nationwide, and is targeting 15 for next year. The company anticipates opening 10 to 15 stores each year for several years.

Henry’s wants to open 10 stores companywide next year, Little said.

The retailer hires from within the communities where it sets up shop, and retrains people from other industries. About 25 percent of store employees weren’t in the grocery business before going to work at Henry’s, she said.

Both Henry’s and Sprouts provide workers with benefits, including health care and 401(k) plans.

Sprouts Farmers Market

Headquarters: Phoenix

Store count: 38 in four states

Store size: 25,000 to 30,000 square feet

Employees per store: About 80

Site types: Existing buildings or new construction

Store growth: Added seven so far this year, with four more coming in 2009

Revenue: $222.4 million, according to Inc. magazine

Founded: 2001

Business type: Private

Web: sprouts.com

Henry’s Farmers Market

Headquarters: Irvine

Store count: 32 stores in California

Store size: 25,000 square feet

Employees per store: 100-110

Site types: Prefers existing buildings

Store growth: Added three so far this year, a fourth opens Sept. 30; plans at least 10 in 2010

Ownership: Smart & Final Inc. purchased company from Wild Oats Markets in 2007